Four Ways the Proposed EEOC Wellness Rule Would Impact Incentive Programs

On April 20, the U.S. Equal Employment Opportunity Commission (EEOC) published a Notice of Proposed Rulemaking (NPRM) describing how Title I of the Americans with Disabilities Act (ADA) applies to employer wellness programs.

According to the EEOC’s release, the proposed rule is designed to “provide much-needed guidance to both employers and employees about how wellness programs offered as part of an employer’s group health plan can comply with the ADA consistent with provisions governing wellness programs in the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Affordable Care Act.”

The proposed rule is, not surprisingly, fairly complicated.

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For the most part, the proposed EEOC rule applies to wellness incentive programs that tie participation or health to employee health care coverage costs. Health insurance premiums often represent the incentive, and health risk assessments (HRAs) and health screenings commonly are the programs. In these wellness incentive programs, typically one group receives a reward (e.g., lower health care costs) while another group receives a penalty (e.g., higher health care costs).

The proposed rule is designed to ensure program participation is voluntary and rewards/penalties are not too excessive. Four key points and examples are highlighted below. (Note: Examples assume OrgX has average annual health care costs (employer plus employee portions) of $6,000 for individuals and $16,000 for families.)

  1. The proposed rule would eliminate nonvoluntary programs, including so-called “gated” health plans (e.g., using wellness participation as a gate to qualify for health coverage or a particular health plan option, or basing employment or compensation decisions on program participation). Example of program no longer allowed under proposed rule: OrgX has preferred provider organization (PPO) and high-deductible health plan (HDHP) options, but only workers who participate in the health screening have access to the PPO plan.
  2. The proposed rule would reduce participation-only incentive limits to the same 30% maximum currently applicable to health-contingent incentives. Example of program no longer allowed under proposed rule: OrgX offers an incentive of 50% of self-only coverage costs ($3,000 discount on annual premiums) for participation in a health screening.
  1. The proposed rule would apply incentive maximums to self-only coverage costs (both employer and employee combined cost), as opposed to the costs of family coverage. Example of program no longer allowed under proposed rule: OrgX offers an incentive of 20% of family coverage costs ($3,200 discount on annual premiums) for participation in a health screening.
  1. The Affordable Care Act (ACA) allows up to a 50% incentive for tobacco cessation. The proposed rule would reduce the tobacco-cessation incentive limit to 30%, if a medical test is used to determine tobacco use. Example of program no longer allowed under proposed rule: OrgX offers an incentive of 50% of self-only coverage costs ($3,000 discount on annual premiums) for workers who demonstrate via a health screening blood draw that they do not use tobacco.

Additionally, the proposal clarifies that programs must be designed to promote health and offer reasonable alternative standards, provides rules for employer notifications, confidentiality and nondiscrimination requirements and could potentially place additional limits on incentives. But for all intents and purposes, the proposal would appear to limit OrgX in the above examples to offering a maximum of $1,800 in annual wellness incentives (or $150 per month).

For more information, the EEOC has also published a fact sheet for small businesses and a question-and-answer document for the general public and is welcoming public comments here on the proposed rule up until June 19—Thus far, 31 comments have been submitted.

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Neil Mrkvicka
Senior Research Analyst at the International Foundation

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